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ALTA Best Practices. Changes in Regulatory Scrutiny. Dramatic increase in regulation and scrutiny– 3 rd party service providers: 2001 – OCC guidance on 3 rd party service providers 2006 FDIC guidance on 3 rd party service providers

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changes in regulatory scrutiny
Changes in Regulatory Scrutiny
  • Dramatic increase in regulation and scrutiny– 3rd party service providers:
    • 2001 – OCC guidance on 3rd party service providers
    • 2006 FDIC guidance on 3rd party service providers
    • 2011 Formal enforcement action requiring lenders to improve oversight of 3rd party service providers
2011 formal enforcement action

2011 Formal Enforcement Action

Foreclosure Weaknesses:

Inadequate policies and procedures;

Inadequate monitoring and controls;

Lack of sufficient audit trails;

Inadequate quality controls;

Inadequate identification of risks;

Inadequate staffing; and

Discrepancy of fees charged.

changes in regulatory scrutiny1
Changes in Regulatory Scrutiny
  • Dodd Frank
  • CFPB

1. American Express - $85 million

2. Discover - $200 million

3. Capital One - $210 million

  • NAIC
  • Market conduct examinations
  • Bar Examiners and random audits
changes in regulatory scrutiny2
Changes in Regulatory Scrutiny
  • CFPB Bulletin 2012-03
    • “Legal responsibility may lie with the supervised bank...as well as...service provider.”
  • Standard
    • Due diligence
    • Lender must produce proof of review of a service provider’s policies
    • Lender must express clear guidance as to compliance
    • Lenders must demonstrate prompt action for service provider missteps
lender response to the regulatory changes
Lender Response to the Regulatory Changes
  • National lender contacts title underwriters—minimum standards for title underwriter oversight
  • Annual background checks
  • Annual credit checks
  • Escrow controls
  • Policy inventory controls
  • Underwriter audit of agents
  • Operational oversight of agents
  • Agent Vetting Company
  • ICL on steroids
alta response to market demands
ALTA Response to Market Demands
  • Establish and maintain current licenses
  • Adopt and maintain appropriate written procedures and controls for IOLTA accounts
    • Safeguard clients funds
    • Reconcile receipts and disbursements on a daily basis
    • 3-way reconciliation once a month
    • Segregation of duties
    • Authority to access and transfer funds
    • Employee background and credit checks
alta response to market demands1
ALTA Response to Market Demands
  • Adopt and maintain a written privacy and information security plan
    • Physical security of non-public information
    • Network security of non-public information
    • Proper disposal of non-public information
    • Disaster management plan
    • Oversight of service providers
    • Audit and oversight to ensure compliance
alta response to market demands2
ALTA Response to Market Demands
  • Adopt standard real estate settlement procedures and policies that ensure compliance with federal and state laws
    • Submit Documents for recording within 2 days of closing
    • Procedures to ensure consumers

are charged established rates

3. Post closing quality check

alta response to market demands3
ALTA Response to Market Demands
  • Adopt and maintain written procedures related to title policy production, delivery, reporting and premium remittance
    • Policies Delivered within 30 days of closing
    • Premium reporting and remittance by last day of month after closing
alta response to market demands4
ALTA Response to Market Demands
  • Maintain appropriate professional liability insurance and fidelity coverage
    • Professional E and O
    • Fidelity coverage – when required by state law or contractual obligations
    • Surety coverage– when required by state law or contractual obligations
alta response to market demands5
ALTA Response to Market Demands
  • Adopt and maintain procedures for resolving consumer complaints
    • Procedures for logging and resolving consumer complaints
    • Single point of contact
    • Complaint log
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